August data on retail, industrial production, RRR cut

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China's real estate sector is still in a period of 'adjustment,' says statistics bureau

BEIJING — China’s retail sales and industrial production picked up pace in August with better-than-expected growth, according to National Bureau of Statistics data released Friday.

Retail sales grew by 4.6% in August from a year ago, beating expectations for 3% growth forecast by a Reuters poll. The increase was also faster than the 2.5% year-on-year pace in July.

Industrial production grew by 4.5% in August from a year ago, better than the 3.9% forecast and faster than the 3.7% increase reported for July.

Within that category, the value added of equipment manufacturing rose by 5.4% from a year ago. The output of solar cells and service robots surged by more than 70% from a year ago.

The latest industrial production and services output figures indicate Oxford Economics’ third-quarter GDP forecast is intact, and steady activity would mean the economy can reach 5.1% growth this year, said its lead economist Louise Loo in a report Friday.

China's August economic data shows stabilization but not a 'huge rebound,' economist says

Fixed asset investment, however, grew by 3.2% year-on-year in August on a year-to-date basis. That missed expectations for a 3.3% increase and was slower than the 3.4% pace reported as of July.

The figure was dragged down by a steeper drop in real estate investment, and a slowdown in infrastructure investment. Only manufacturing saw the pace of investment pick up.

Statistics bureau spokesperson Fu Linghui said the real estate market was still in a period of “adjustment” and noted declines in sales and investment. He said the property sector would recover as recent policy took effect.

The key is to maintain the shape and pace of the economic recovery so that companies are willing to continue investing and residents are willing to continue consuming.

Bruce Pang

chief economist and head of research for Greater China, JLL

In the first 10 days of September, average daily new home sales fell by 19.3% from a year ago, better than the 24% decline in August, according to a Nomura report, citing a Wind Information survey of 21 major cities in China.

“It’s too early to conclude that property easing hasn’t been effective — the most meaningful property easing measures had been implemented end-Aug/early-Sep after all, including nationwide mortgage loosening initiatives and measures across all four Tier-1 cities,” Oxford Economics’ Loo said.

Private sector investment drops

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It said last month it will stop reporting the unemployment rate for young people ages 16 to 24. The bureau said it was reassessing its methodology, and would resume releases at an unspecified date.

While spokesperson Fu said the bureau didn’t yet have a figure to share, he added that data from some departments showed more young people were able to get jobs in August.

He noted that pressure on employment remains, and more effort is needed to expand the number and quality of jobs.

China’s economic rebound from the pandemic has slowed since the second quarter, dragged down by a real estate slump. Exports, another key driver of China’s economy, have also dropped as global demand for Chinese goods wanes.

The statistics bureau release described August data as showing “marginal improvement.”

“The national economy showed good momentum of recovery with high-quality development making solid progress and positive factors accumulated,” the statistics bureau release said. “However, we should be aware that many unstable and uncertain factors in the external environment still exist.”

Workers make pods for e-cigarettes on the production line at Kanger Tech, one of China’s leading manufacturers of vaping products, on September 24, 2019 in Shenzhen, China.

Kevin Frayer | Getty Images News | Getty Images

Within retail sales, online sales of physical goods rose by 7.6% in August from a year ago, according to CNBC calculations of official data accessed via Wind.

Autos saw sales rise by 1.1%. Among the categories with faster growth were cosmetics, up by 9.7% and communication equipment, up by 8.5% in August from a year ago. Catering sales grew by 12.4% during that time.

Services sector retail sales grew by 19.4% in the January to August period from a year ago, slower than the 20.3% pace recorded for the period through July.

More rate cuts

Late Thursday, the People’s Bank of China said that it was cutting the amount of cash that banks need to have on hand by 25 basis points, effective Friday. It was the second reserve requirement ratio cut this year since one in March.

In the last several weeks, Beijing has announced a slew of measures to support the real estate market and consumption.

China's economic weakness is less linked to the global economy than usual: BNP Paribas

Monetary policy has remained relatively loose compared with aggressive rate hikes in the U.S. and Europe.

Also effective Friday is a reduction in the foreign exchange reserve requirement ratio for financial institutions to 4%, from 6%. The planned cut was announced two weeks ago.

The central bank has also trimmed other benchmark rates, such as the one-year loan prime rate.

China’s slowing economic growth

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